Tuesday, July 29, 2008

Wynne Backs Tanker Split-buy

In an interview with Air Force Magazine former Secretary of the Air Force Michael Wynne states his case for awarding contracts for both the KC-767 and KC-30. He believes this may be the only way to resolve the legal impasse surrounding the tanker competition.

A spilt-buy has in the past been regarded impractical due to the increased cost of low rate production of 7.5 aircraft per year:

But Wynne, now out of office, said July 28 there is another way to approach the split buy: have each contractor build at the same annual rate that they would have in the winner-take-all scenario—upwards of 15. Keeping two suppliers would strengthen the industrial base, replace the Eisenhower-era KC-135 tankers “at a faster rate” and maintain competition “well into the future,” not a bad consideration since the Air Force needs to buy about 500 new tankers overall to replace its KC-135s, he said.

As for the higher costs of supporting two tankers lines, Wynne said, when asked, he would support applying some of the $5 billion in added procurement funds that the Air Force will reportedly receive in Fiscal 2010 to cover them.

We at Tanker War Blog think this might be a case of counting your tankers before they are hatched. There are no guarantees on increased funding in 2010. In fact, either candidate for President will probably cut DoD funding when they get into office. Also, if extra funding was available, are extra tankers more important than F-22, C-17, JSF, several space programs, or more ISR?

Wynne may have a point that Under Secretary John Young's solution of an expedited recompete may not get past the draft RFP stage based on the experience with the CSAR procurement:

Wynne said he hopes that the GAO will accept Young’s tack in trying to resolve the KC-X protest. “I worry because it is a very similar tactic to what I tried on the [combat search and rescue replacement vehicle program]—trying to simply address the issues that the GAO has brought forward,” he said.

The GAO did not accept Wynne’s approach to resolving the industry protests on CSAR-X and instead recommended that the Air Force reopen that competition more broadly, which USAF subsequently did.

DoD should issue the new draft tanker RFP this week or next. We will see if Mr. Young can make all sides happy enough to allow for the final RFP to be issued in mid-August without a protest.

We here at Tanker War Blog believe this will an extremely tough order to fill, but Mr. Young has the best chance of anyone in DoD to succeed. If he can't do it, no one can.

12 comments:

george hanshaw
said...

But Wynne, now out of office, said July 28 there is another way to approach the split buy: have each contractor build at the same annual rate that they would have in the winner-take-all scenario—upwards of 15. Keeping two suppliers would strengthen the industrial base, replace the Eisenhower-era KC-135 tankers “at a faster rate” and maintain competition “well into the future,” not a bad consideration since the Air Force needs to buy about 500 new tankers overall to replace its KC-135s, he said.

And if this is what passed for 'reasoning' when he was SecAF, it's a damn good thing he's out. This is incredibly ignorant.

One would assume from the posting that he is recommending simultaneous buys from both vendors at 15 units per. What a lousy idea. You get to DOUBLE the program overhead associated with tanker ops while now complicating the support and operations problems (Milcon for two different aircraft, parts inventories for two different aircraft, maintain technical training programs for crew and maintenance support of two different aircraft, etc.)

This method positively guarantees that the program costs will go up markedly. Nor does it truly address the size issues of the KC-30.

But the greatest problem is the extra money. Look in the FYDP. Funding for this procurement program is already skosh. It will be tested still more by the delay in executing that just occurred. If the KC-30 really requires the factory that N-G was supposed to break ground on 28 June, guess what? It didn't happen. With the delays already caused by USAF procurement incompetence, this program is already set up for the sort of death spiral that cost us so many aircraft in the past. It goes like this: Delays cost money, program costs go up, making program unit costs go up. Congress says that the USAF can't possibly afford y number of aircraft, because the cost per unit ( y divided by fixed costs plus incremental costs) is now too high. Their solution is to buy fewer aircraft annually and stretch out the buy. Well great, that increases the fixed costs both because the number of years the program will be in business has just increased, and it increases fixed costs because you now have to program for an inflation factor. At the new slower rate production the unit costs are markedly higher, leading Congress to scream again, cutting the number being purchased annually and further extending the buy.

We lost at least two and a half wings of F-15s in the Seventies and Eighties from such stupidity.

As for the higher costs of supporting two tankers lines, Wynne said, when asked, he would support applying some of the $5 billion in added procurement funds that the Air Force will reportedly receive in Fiscal 2010 to cover them.

Good Lord, the man obviously has no clue as to how much of the unit cost of an aircraft buy is attributable to program management costs. You double the program management cost of a $40 billion buy, and $5 billion isn't going to begin to cover it.

Wynne said he hopes that the GAO will accept Young’s tack in trying to resolve the KC-X protest. “I worry because it is a very similar tactic to what I tried on the [combat search and rescue replacement vehicle program]—trying to simply address the issues that the GAO has brought forward,” he said.

The GAO did not accept Wynne’s approach to resolving the industry protests on CSAR-X and instead recommended that the Air Force reopen that competition more broadly, which USAF subsequently did.

I read once that one definition of insanity is doing the same thing repeatedly and expecting a different outcome. Or perhaps that wasn't insanity, it was stupidity. Either way, the man again shows abysmal ignorance.

The GAO isn't saying what they are saying because they think it would be nice. They aren't doing it to piss off USAF or DOD procurement either, they are doing it because IT IS THE LAW.

The alternative to doing it right is that the losing contractor takes you to court and (eventually, it'll take a few years) WINS, nullifying the contract and costing billions in damages to be paid by the taxpayer tothe losing contractor, for which the USAf or DOD gets absolutely nothing except embarassment.

It's fortunate this guy was given the bum's rush out of the Dept of the Air Force. It's unfortunate he was ever let in the door.

As for the higher costs of supporting two tankers lines, Wynne said, when asked, he would support applying some of the $5 billion in added procurement funds that the Air Force will reportedly receive in Fiscal 2010 to cover them.

He would support that, would he? I'm sure that as a has-been SecAF who was fired for cause, his support would carry a LOT of weight.

Is this guy an idiot, or what?

In related developments:

DefenseAlert - 6/6/2008

June 6, 2008 -- The Pentagon's acquisition chief is warning all weapon system program managers that unforeseen future cost growth will be paid for out of hide, a new policy that aims to provide a measure of funding stability to the Defense Department's procurement accounts, but one that could penalize projects with rising costs by scaling back planned capabilities or quantities.

DefenseAlert - 6/10/2008

June 10, 2008 -- The Pentagon's top officer today said the military's acquisition system is riddled with systemic challenges that generate "way too many major programs whose costs have gone sky high," adding that the Defense Department needs to rein in requirements in an effort to curtail outlays necessary for new weapon systems.

DefenseAlert - 7/28/2008

July 28, 2008 -- The Pentagon is seeking permission from Congress to shift more than $3.2 billion from lower- to higher-priority programs, moves that would provide more than $1.2 billion to fund intelligence, surveillance and reconnaissance projects sought by Defense Secretary Robert Gates' ISR Surge Task Force.

1. What Fantasyland did Wynne live in?2. Why are we listening to him now?

Another interview reported in AF Mag. seems to support the theory that Mr. Wynne is perhaps not the best thinker...

"Wynne thinks the service should be pitiless with losing contractors, so they’re not encouraged to endlessly protest important contracts. Excessively kind language, he said, leads the losers to think they only lost by a hair. In the KC-X tanker competition, “We should have been harsher on the loser,” Wynne said during an interview July 28. However, the service refrained from frank comments. Instead of writing a " 'We don’t want you memo' " to Boeing after it lost to Northrop Grumman, the service crafted a " 'We like you, but you didn’t win' memo," Wynne said. “I just don’t think the write-up was harsh enough.” Boeing was apparently emboldened by the perceived narrow miss to launch its protest,... "

I believe that Boeing was "emboldened" by USAFs apparent disregard of the conditions written in the RFP.

The GAO agreed with that position in their ruling (which came out prior to this interview). I think a "nasty-gram" would provide the losing contractor with even more reason to protest? (i.e. we lost because of personal prejudices against our company, not based on the merits of the competing proposals)

Perhaps taxpayers should deal more harshly with incompetently/improperly run acquisitions - officers "losing" a GAO ruling would face loss of up to 100% of their retirement benefits along with loss of their job. I believe that would reduce the number of protests.

The only way I can see the AF operating KC-767s is if they're either forced to make a split purchase (can't really see that happening, too expensive), or if congress does another u-turn and tells the AF to single-source the KC-767 (in which case, the taxpayers should bend over and grab hold of their ankles!)

It seems clear that the KC-30 is preffered by the AF (and those other customers that selected it over different flavours of KC-767).

"It seems clear that the KC-30 is preffered by the AF (and those other customers that selected it over different flavours of KC-767)."

You EADS/NG supporters STILL don't get it! It's not, nor ever will be, about which proposal the AF 'prefered', it's about which proposal best satisfied the RFP using the rules the AF itself laid out. The proposal that best fit, was clearly the Boeing proposal.

As far as 'other' customers selections, are you also including the recently canceled announcement by the President of France for an order that was NOT put out for competition? I'll agree that small countries with a need for just a few aircraft might find value in the whole 'bigger is better' mantra, but that doesn't work of the USAF.

What do you think will happen with the revised RFP? Yep, the KC-30 will win again. ROTFL

All depends. If the RFP is revised to give credit for fuel capability above 200,000 pounds, it would be reasonable for Boeing to propose a larger aircraft. But as long as the RFP specifically said that no credit for that would be given, the 767 was the appropriate aircraft.

A KC-777 would hold substantially mopre fuel than an A330, heck, it'd hold more than a KC-10 even.

But that's the whole point. The only plane Boeing really wants to offer is the KC-767. They've invested a lot of money in it and they don't want to put it on the shelf already. The 767 line is on life-support and Boeing certainly doesn't want to dilute the hugely profitable 777 line with military orders (and likely have to compensate commercial customers because their deliveries had to be delayed by AF ones!)

Additionally, a tanker based on the 777 would take at least three years to develop (by Boeing's own admission), cost Boeing a whole bunch more, be off the high-end of the risk scale, and be massively more expensive for the taxpayer.

Lastly, and most deliciously of all, a 777 based tanker blows every argument Boeing has used against the KC-30 out of the water. Too big; booms in the air; booms on the ground; MILCON costs; yada, yada, yada.

I'm far from convinced that larger 767 variants are an option either - their performance stacks up even worse against the A330-200 than the 767-200 based tanker.

But that's the whole point. The only plane Boeing really wants to offer is the KC-767.

What unmitigated ignorance. Boeing would make a tanker out of anything they could make a buck on, especially as many bucks as there is to be made in this contract. You cannot possibly be serious.

Additionally, a tanker based on the 777 would take at least three years to develop (by Boeing's own admission), So what? look at the procurement RATE for this program. There won't be serious numbers of the new tanker in the field for another 5-10 years no matter what happens. There is PLENTY of time to work this issue.

cost Boeing a whole bunch more Again, what utter nonsense. Unlike the A380 program, this program ultimately WILL make a profit. Boeing has never been averse to putting company money on the line. They bet the company on the 707 whereas conventional wisdom said the Lockheed Electra was the logical step up from reciprocating engine passenger planes. Same issue with the C-5A that was supposed to steal the freighter market from the 747. I think you are saying what you WISH the situation was, not what it actually is.

be off the high-end of the risk scale, Explain why you believe that the company that has made ten times more tankers than any other company in the world would be 'riskier' in developing a tanker variant of a successful commercial aircraft than a company which has never before made tankers?

and be massively more expensive for the taxpayer. And how could you know this if you don't see their proposal?

Lastly, and most deliciously of all, a 777 based tanker blows every argument Boeing has used against the KC-30 out of the water. Too big; booms in the air; booms on the ground; MILCON costs; yada, yada, yada.Apparently you have a comprehension problem. The 777 would be offered only if there was a substantial change in the RFP. What DOD has apparently decided to do is to make the substantial change in the RFP but then treat them as if they aren't substantial changes. This virtually guarantees this being tied up in court for at least a few years. Apparently the new SecAF nomination will be tied up in Congress as well:

Defense expert Loren Thompson of the Lexington Institute insisted this plan for a redo won't fly.

"How can you favor an outcome that wasn't in the original [requirements] without giving the teams time to adjust what they are offering? I'm not sure which airplane is better ... but I know a bad process when I see one," said Thompson.

"Boeing is stuck with a proposal that was responsive to the original [requirements]. The rules have now changed, and its proposal is not as good a fit with the new selection criteria."

Thompson expressed skepticism that the Pentagon will succeed in pushing it through by the end of the year.

"Both teams know the new award will not be made in this administration," Thompson said.

Members of Washington state's congressional delegation said they will do everything they can to ensure that outcome.

Democratic Sen. Maria Cantwell said she is blocking Senate action on President Bush's nomination of Michael Donley as the new Air Force secretary, largely because of the handling of the tanker competition.

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